L&T consol Q1 consol net rises 45% to Rs 1,702 crore

On the Hyderabad metro project, the company cannot exit the business but can derisk its exposure.

L&T consol Q1 consol net rises 45% to Rs 1,702 crore
On the road projects, Shankar Raman reiterated that it was a stated objective to exit the concession business but it would not be sold on an asset-by-asset basis. (IE)

Engineering and construction major Larsen & Toubro (L&T) on Monday posted a 44.92% rise in consolidated net profit at Rs 1,702.07 crore for the seasonally-weak quarter ended June, helped by the performances of its major businesses. In comparison, the company had posted a net profit of Rs 1,174.44 crore for the same period a year ago.

L&T’s earnings beat Bloomberg analysts’ consensus estimate, who were expecting it to post a net profit of Rs 1,647.05 crore.

During the period under review, L&T’s revenue from operations rose 22.22% to Rs 35,853.20 crore, riding on strong execution in the infrastructure segment and “sustained growth momentum” in the information technology and technology services portfolio. The Mumbai-headquartered firm’s revenues for the comparable year-ago period stood at Rs 29,334.73 crore, it said in a statement.

The company in Q1 won orders worth Rs 41,805 crore at the group level, a 57% on-year rise, with its consolidated order book of the group rising to Rs 3.63 trillion as of June 30. This is the highest-ever order book position for L&T. The company saw international orders at Rs 17,842 crore, which comprised 43% of the total order inflow during the quarter.

“There is a distinct improvement in the ordering environment, and we do see project-sponsoring authorities moving phases to make sure that what is tendered gets awarded quickly. This tailwind actually helped the company bag orders, largely from sectors such as infrastructure and some from hydrocarbon, and as far as a services business, the orders grew well for the IT and engineering business,” said R Shankar Raman, chief financial officer of L&T in a post-earnings call.

“And as far as the services business, the orders grew well for the IT and engineering business. The domestic orders have grown by 36%, helped by certain marquee projects in the area of water and effluent treatment and buildings business verticals,” he said, adding the order pipeline continues to be robust.

During the reporting quarter, the firm’s total expenses rose to Rs 33,615.98 crore (from Rs 27,708.08 crore), which included the cost of raw materials and components that rose to Rs 4,214.05 crore (Rs 3,721.95 crore).

The company’s revenue from its infrastructure projects segment rose 36% on year to Rs 14,181 crore, aided by improved execution momentum as the Covid-related challenges receded in the current quarter. The energy projects segment posted customer revenues of Rs 5,073 crore, a 3% y-o-y growth, while the hi-tech manufacturing segment posted customer revenues of Rs 1,272 crore (a 3% y-o-y growth).

IT & Technology Services (IT&TS) segment revenues rose 30% to Rs 9,424 crore, while the financial services segment recorded a 3% fall in income from operations to Rs 2,958 crore. The fall was mainly due to the targeted reduction in the wholesale loan book.

On the road projects, Shankar Raman reiterated that it was a stated objective to exit the concession business but it would not be sold on an asset-by-asset basis.

“To sell it by asset-by-asset is doing a disservice to business, but like the platform to shift to another investor as there is a lot of value in the platform,” Raman said, adding the company should be able to announce the exit from road concession business in this fiscal.

On the Hyderabad metro project, the company cannot exit the business but can derisk its exposure. The firm is looking to refinance the debt, monetise real estate and government grants and scout for a co-investor.

“As of today, we can go down to 51% and then progressively to 26% going forward.”

On the outlook, he said the project pipeline for the fiscal stands at Rs 7 trillion, out of which L&T is confident of converting 15-20% into orders

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